Retirement Investing: Dividends For The Long Haul

Includes: EXC, HAS, WM, XOM
by: Pey Shadzi

Let's face it, things aren't as rosy for future retirees as they once were. With pension plans becoming a thing of the past and healthcare costs rising at alarming rates, it's more important than ever to prepare for retirement early. In the past, working at a company for 30 years might have been enough to secure a nice moderate pension for retirement but things have seriously changed. For young people these days, it's imperative to develop a strategy early on and implement this strategy through thick and thin, building up a sizable account balance along the way.

It's because of this very reason that I began investing in dividend-paying stocks over three years ago in my mid-20s. After purchasing a small stake in SPY and collecting my first $3.23 dividend back in mid-2009, I was hooked. What can I say? I've been faithfully investing money back into the market ever since on a steady, ongoing basis, doing my best to build up the number of shares to help out for my retirement. And you know what? Taking an interest in the market and becoming more knowledgeable about the companies I own has not only been fun but very rewarding.

Take one of my favorite companies, Exelon Corporation (NYSE:EXC), for example. With a beta of 0.4, a current dividend yield of 5.4% and a payout ratio of 54%, this stock's not liable to make anyone rich overnight, but what about 30 years down the line? Faithful reinvestment of Exelon's dividend, which I have been practicing for about 18 months now, has allowed me to slowly build up my share arsenal of a company with a bright, solid future ahead. Exelon certainly faces some pending uncertainty and many individuals might rather opt out of owning the stock until the dust clears. However, I feel differently and have been buying as shares dip below $40. I'd rate this utility as a long term "buy."

Or how about Waste Management (NYSE:WM)? Though it may not operate in exactly the most exciting field, picking up garbage and specializing in recycling has been quite profitable for this company. Waste Management is another company with a low beta (0.55), a sizable dividend (3.9%) and a reasonable payout ratio of 67%. Though I generally wait to pick up more shares of Waste Management until the yield pushes past 4%, it's safe to say I'm watching the stock closely and reinvesting those dividends faithfully hoping to build up my shares of this quasi-utility in order to secure a brighter tomorrow.

Another company I love right now is Hasbro, Inc. (NASDAQ:HAS). Hasbro's taken a bit of a beating over the last year, dropping nearly 22%. But the company has a strong line of brands to support future growth, such as Marvel, Nerf, Star Wars, G.I. Joe, Tonka, Milton Bradley, Parker Brothers -- and the list goes on. Better yet, Hasbro's 4.1% dividend yield and 41% payout ratio suggest this toy maker will be able to boost its dividend for many years to come. I'm certainly on board and look forward to reinvesting Hasbro's dividends in order to compound my investments and enjoy my retirement.

No "dividend for the long haul" list would be complete without including oil giant Exxon Mobil (NYSE:XOM). Yes, you'd be correct to point out the dividend is a bit lackluster at 2.2% and with Warren Buffett and other "super investors" dumping the stock while looking for more undervalued opportunities, I can see how you'd be worried. But for someone who's looking decades down the road, Exxon has faithfully increased its dividend year-after-year for decades. With $420 billion in annual revenue and $12.6 billion in cash on hand, Exxon is sitting pretty. $17 billion in debt is highly manageable and though Exxon has seen a recent run-up over the last few years, I still believe the stock represents a solid long-term value. Better yet, with a secure past of year-after-year dividend raises since 1982, I'm confident they'll be able to keep this up for decades to come.

Though I'm still a young guy, I look forward to continuing to faithfully contributing to my investment account monthly while reinvesting my dividends. Sure, Social Security may provide a little relief for me as I age gracefully, but I much prefer to rely on my own current earning potential and ability to reinvest in order to prepare for whatever might transpire in the future. For me, that means choosing dividends for the long haul, aggressively funding my accounts and reinvesting my dividends.

Disclosure: I am long EXC, HAS, WM, XOM.